Is it the third Wednesday of the month already? By gum, it is! That means that tonight, the new issue of the Motley Fool Rule Breakersnewsletter service goes out -- with new picks for ultimate growth stock investors.
I remember when David Gardner first developed the now-popular Rule Breaker investing strategy in the 1990s. He had no problem buying in to stocks that some figured would be a passing craze, like eBay (EBAY -0.31%) or Starbucks(SBUX 1.05%). At the time, online auctions seemed like little more than a flea market for lazy people. Starbucks was charging $3 for brewed beans that the nearby convenience store couldn't give away.
Why did they work? Why do they still work? Answering these questions and recognizing when these same questions should be asked again should be at the very heart of your quest to blow the market away as an investor.
In today's column, I'm going to walk you through some great historical quotes that actually make up some pretty darn good investing advice. Even if these classic sayings had little to do with Wall Street when they were first coined, you really can apply them to improve your ability to ferret out great stock ideas.
Hit 'em where they ain't
Hall of Fame baseball player Wee Willie Keeler was once asked about the secret to his amazing .341 batting average. He replied that getting a hit was as easy as putting the ball into play where the nine ballplayers on the field weren't.
That can work for you as an investor, too. Some of David's best stock picks over the past dozen years have come from companies that most investors wouldn't touch. If the mainstream media proclaims that a stock is overvalued or analysts are bearish on a company, what should that tell you? They may seem like opposite ends of the valuation spectrum, but they really aren't. The market, at any given moment, is a gauge of popularity. If a lot of people think a stock is either overvalued or worthless, that's just a built-in audience to drive a stock higher down the road.
A perfect current example is satellite radio. Rule BreakerXM Satellite Radio (Nasdaq: XMSR) and Sirius(SIRI -1.44%) are trading well below their recent highs. A director at one company fled, warning of an impending crisis. The other company is being sued by a major broadcasting network. The market is ignoring the booming popularity of satellite radio and is putting too much weight on the losses the companies are incurring as they subsidize the acquisition of new listeners. That's only temporary, though. Money follows the crowds, and the crowds are flocking to satellite radio.
You can observe a lot by watching
This colorful Yogi Berra expression is another Wall Street truism. Watch a company long enough, and you may start to recognize rewarding patterns. For instance, Intuitive Surgical(ISRG -1.74%) has done nothing but blow away analyst estimates over the past year. The company manufactures surgical robotic arms that are making hospital operating rooms more efficient, and that's resonating with surgeons, medical administrators, and patients.
What are the chances of Intuitive Surgical coming up with another welcome earnings surprise the next time it reports its quarterly results? The prognosis is pretty good.
There's no place like home
Dorothy tapped her ruby red slippers and spoke the unforgettable lines that catapulted her back into her black-and-white Kansas world. Investors may also be inclined to focus their initial stock hunts on local companies that are growing quickly.
Will you find the best stocks that way? Probably not, though it will improve your chances to line up enough bunt singles to eventually score the winning run.
Time is what keeps everything from happening at once
Albert Einstein's witty justification for our lifespan can also apply to companies. Waiting every three months for companies to reveal their financials may seem like a cruel burlesque, but it can be a great way to see a story develop slowly.
Apple Computer(AAPL 0.19%) rolled out the first iPod five years ago. With every passing quarter, it became more obvious that the company's digital music player was becoming a mainstream masterpiece in portable consumer electronics. You didn't have to be the first believer to make a mint on Apple. You just had -- and have -- to make sure you're not the last one.
Putting it all together
So how did you first come across many of these stocks? Maybe it was right here at Fool.com. David Gardner's premium growth stock service recommended two of these companies last year. By and large, the selections have paid off beautifully.
Since the newsletter's launch in the fall of 2004, the average pick is up a sharp 27.8%. That compares favorably with the mere 8.3% advance by the market in that time.
So are you ready to take the plunge and become an ultimate growth stock investor? Want David Gardner by your side as you attempt to demystify the market? Subscribe for a year or two or just kick the tires with a free 30-day trial subscription. Act quickly, though. The next issue is just hours away.
Starbucks and eBay are Motley Fool Stock Advisor picks.
Longtime Fool contributor Rick Munarriz finds that eating, sleeping, and breathing growth stocks will work wonders for your financial health. He does not own shares in any of the companies mentioned in this story.The Fool has a disclosure policy. Rick is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.
